ECO-2013 Chapter Notes - Chapter 3: Economic Efficiency, Invisible Hand, Economic Equilibrium
Document Summary
Chapter 3: supply, demand, and the market process. Consumer choice and the law of demand: law of demand- a principle that states there is an inverse relationship between the price of a good and the quantity of it buyers are willing to purchase. As the price of a good increases, consumers will wish to purchase less of it. If one of these other factors changes, the entire demand curve will shift inward/outward. The cost component includes the opportunity cost of all the resources, including those owned by the firm. The cost component includes the opportunity cost of all resources, including those owned by the firm. As the price of a good increases, producers will wish to supply more of it. As the price decreases, producers will wish to supply less: producer surplus, producer surplus- the difference between the price that suppliers actually receive and the minimum price they would be willing to accept.
